Economist: Grexit still possible

S&P: If agreement holds, then Greece upgrade possible

The Economist magazine predicts that even though Greece might have avoided a Grexit in the short term, especially following Monday morning’s EU-19 deal to negotiate a new 3-year bailout plan through the European Stability Mechanism (ESM), the country will inevitably abandon the common currency area before 2019.

The article goes on to outline the more pressing measures that have to be passed through the Greek Parliament by July 15, which include:

Fiscal monitoring

Privatizations

Abolishing early pensions

Merging of pension funds

Opening of closed professions

Abolishing monopolies/oligopolies

New VAT system

‘Freezing’ changes in collective bargaining

The Economist argues that in the medium to long term the possibility of a Grexit is a real danger. First, the debt will most probably deteriorate as the country’s competitiveness has declined rapidly after five years of consecutive GDP implosion; the implementation of the harsh measures appears to be another issue that will be a challenge for the Greek government, but also the monitoring process by the EU institutions. It also notes the political uncertainty within the ruling SYRIZA government with dissenting voices from the extreme left wings.

The weekly magazine concludes that the harshness of the measures in conjunction with the lack of trust between Greece and its creditors will lead to the Grexit, eventually.

 

S&P

Meanwhile, Reuters reported that Standard and Poor’s announced that it could upgrade Greece’s rock bottom credit rating “pretty quickly” if Monday’s plan for a third bailout in five years looks like holding, the rating agency’s top European sovereign analyst said.

Analyst Moritz Kraemer is quoted as saying that although the firm’s longer-term base case remained that Greece would end up leaving the euro, the deal had reduced the immediate risk of that and could lead to an upgrade from its CCC- grade in the next week or two.